Capitec Gives Mzansi a Run for Its Money in Rural Areas
Monday, September 12, 2005
The cracks are starting to show in the Mzansi bank account, launched last year by South Africa’s large retail banks, as smaller banks offer cheaper banking and extend services to previously neglected areas.
South African banks launched the low-cost Mzansi account last October in an effort to provide affordable and accessible banking to the poor in accordance with the financial services charter, which stipulates banks must provide services within 20 km of 80% of all people in living standards measure group 1-5.
Small bank Capitec did not join the Mzansi initiative, believing that it had a superior product offering in the form of a cheaper account, which it has offered to rural and township residents.
Capitec opened its 250th branch in Mount Frere, Eastern Cape, on Monday last week, and plans to open 50 more within the next year. Capitec’s products are aimed at the end of the market even lower than Mzansi’s.
Less than a year after Mzansi’s launch, there have been complaints that it does not offer cheap banking services, especially for entry-level clients.
Nedbank, which holds 10% of all Mzansi accounts, charges R5 for every ATM withdrawal, R2 for a balance inquiry, and an R8 charge for every withdrawal after the sixth withdrawal a month.
Capitec’s Global One Banking account charges a R2 monthly fee; ATM cash withdrawals and debit orders cost R1,80 each; and debit-card transactions are free.
The bank offers 10%-a-year interest on savings accounts, with balances up to R25000, the highest rate offered by any South African bank.
More than 75% of the bank’s branch network is situated close to train stations and other commuter points such as taxi ranks. It has 350000 clients.
Absa, Standard Bank, Nedbank, First National Bank and PostBank have opened 1,6-million Mzansi accounts since its launch in October last year, an average of 6000 accounts a day.
Director of the Mzansi Initiative Colin Donian says the big-four retail banks have increased their infrastructure in areas where it was previously nonexistent or underdeveloped.
“Each bank has its own obligation to contribute before the deadline set out by the financial services charter: 2008.”
The largest number of Mzansi accounts are held by residents of Gauteng and KwaZulu-Natal, with numbers in Mpumalanga and Western Cape growing.
Donian says smaller players such as Capitec are not encroaching on Mzansi’s market. “They play a crucial role in their niche market, and are more agile than the bigger banks and can do things more cost-effectively. Ultimately, the market will determine whether it works or not.”
Capitec’s financial director, Andre du Plessis, says the bank’s branch network is mainly in the rural areas of Mpumalanga, Limpopo and Eastern Cape.
“We’re continuously looking to open new branches. The only problem is finding retail space due to the recent retail boom.”
Trade and Industry Minister Mandisi Mpahlwa said at the opening of Capitec’s Mount Frere branch that corporate banks had traditionally had a low level of outreach as well as service provision to rural areas due to a “risk-adverse financial services market” and low-level wealth and asset holding among poorer communities.
“Marginalised areas are in a perpetual cycle of poverty. We must actively and consciously create linkages to the mainstream economy and extend capital to these areas,” Mpahlwa said.
“Interventions by government and the private sector haven’t been able to make a dent in the problem. We haven’t had the right programmes or incentives. The scale of the problem is so great that they haven’t been able to make an impact yet.”
“This is not banking as we know it; it is unchartered territory (in order) to make finance available to poor people, and there will be risks involved,” Mpahlwa said.
